question about escrow and monthly payments

[mitz501]

let's say i'm paying $1000/month for mortgage payments (using round numbers for simplicity). last week, i received a letter that my escrow fund is running low and that i have to pay the amount of $400 or pay $1040 over the next 10 months ($400 distributed over 10 months and added to my monthly mortgage). is this scenario common?

 

[lnc]

Since you have an escrow account, I assume you impound your property tax with the mortgage payment.  And yes, it's common for the mortgage servicer to adjust your payment due to the facts like the one you stated, the escrow fund is low.  If for whatever the reason, the escrow fund is more then adequate, they'll lower the payment also.

An escrow or impound account is an account that your lender set up to pay recurring property tax.  Due to changes in amount of property tax, the lender adjust your payment accordingly if the fund in the escrow account is not adequate to cover the property tax payment.

 

[daedalus]

The rule I've seen is the account cannot be drawn down below 1 month's impound payment.  So if your impound payment (separate from principal and interest) is $200, that is the least the account can go down to, after the servicer makes the regular payments on prop taxes, insurance, or whatever else the account covers.

We had a weird thing last year, where our mortgage co sent us a check for like $400 because they overestimated prop taxes for the year...and then the very same week sent us a letter raising our impound payment by $8.  Apparently there aren't a lot of smarts built into the program they use to calculate it.